To accelerate its national expansion plans, Los Angeles bread maker La Brea Bakery has agreed to be acquired by Irish food giant IAWS Group for $55 million.
The deal would give La Brea Bakery, a local institution among food lovers, the capital and expertise to build a production plant in Philadelphia and expand further along the East Coast, said Philip Shaw, the company's chief operating officer.
"We're partnering with someone who has the financial wherewithal and structure necessary to grow the business," Shaw said.
Shaw, founder Nancy Silverton, Chief Executive Manfred Krankl and the rest of the management team would stay on with the company after Dublin-based IAWS completes its purchase of 80% of the company's shares. Under the terms of the deal, IAWS would be able to acquire the remaining shares in five years.
The purchase would include the main bakery on Washington Boulevard, the original retail shop started in 1989 on La Brea Avenue and a cafe at Disney's California Adventure. It would not include the restaurant Campanile, which is next to the original shop and is owned by Silverton and her husband Mark Peel.
The size of the transaction underlines how quickly the bakery business has grown in the last few years--and how much larger IAWS thinks it can be.
In addition to its fresh-baked breads and pastries, which are delivered to 700 customers throughout Southern California with its own fleet of trucks, the company also owns a commercial bakery in Van Nuys. That operation ships partially baked sourdough baguettes, focaccia and sesame semolina bread to 4,000 customers in 39 states and Mexico. This 3-year-old business accounts for more than half of the company's sales, Shaw said.
He said the company, which posted more than $20 million in sales in 1999 (the privately held firm did not disclose 2000 sales), needed a bigger partner to give it greater access to lower-cost financing and new markets.
An IAWS release said it expects operating profit of $4.5 million at La Brea this year. The company is assuming $13.5 million in debt.
IAWS, a diversified food company that sells everything from feed to fried chicken, is listed on the Irish and London stock exchanges. It operates a similar bakery company in Chicago, Cuisine de France, which sells partially baked gourmet bread along with desserts to food service customers.
"This acquisition will establish IAWS as the market leader in the premium artisan bread market in the U.S," said Phillip Lynch, IAWS chief executive. "La Brea's freshly baked bread has been raved about by Southern Californians for years and the brand has huge potential for growth."
Although the brand has a following in the Southland, analysts say it has had to work hard to establish a reputation elsewhere, hitting restaurant and food industry trade shows.
Partially baking and freezing bread for restaurants and supermarkets to bake and pass off as fresh is nothing new. Many companies have been doing it for years. But La Brea is one of the few so-called artisan bread makers doing it, something that gives it a niche in that competitive business.
"It's a frozen product, but it's amazingly good for a frozen product," said Randall Hiatt, a restaurant consultant in Costa Mesa. "When you're away from areas such as L.A., San Francisco and New York, this is automatically going to be a superior product" to what is available locally.